In its weekly release, Houston-based oilfield services company
Baker Hughes Inc.
) reported a rise in the U.S. rig count (number of rigs searching
for oil and gas in the country). This can be attributed to an
increase in the tally of both oil and gas-directed rigs.
The Baker Hughes data, issued since 1944, acts as an important
yardstick for energy service providers in gauging the overall
business environment of the oil and gas industry.
Analysis of the Data
Rigs engaged in exploration and production in the U.S. totaled
1,861 for the week ended May 16, 2014. This was up by 6 from the
previous week's rig count and indicates the second increase in as
The current nationwide rig count is more than double the lowest
level reached in recent years (876 in the week ended Jun 12, 2009)
and is above the prior-year level of 1,769. It rose to a 22-year
high in 2008, peaking at 2,031 in the weeks ending Aug 29 and Sep
Rigs engaged in land operations ascended by 9 to 1,791, offshore
drilling was down by 2 to 57 rigs, while inland waters activity
decreased by 1 to 13 units.
Natural Gas Rig Count:
The natural gas rig count - which last month slumped to its lowest
point since May 1993 - increased for the first time in 3 weeks to
326 (a gain of 3 rigs from the previous week). Despite the weekly
growth, the number of gas-directed rigs is down by 60% from its
recent peak of 811, achieved in 2012.
In fact, the current natural gas rig count remains 80% below its
all-time high of 1,606 reached in late summer 2008. In the year-ago
period, there were 354 active natural gas rigs.
Oil Rig Count:
The oil rig count - that rocketed to a 27-year high of 1,534 in Apr
2014 - was by 3 to 1,531. It has recovered strongly from a low of
179 in Jun 2009, rising 8.6 times. The current tally is also above
the previous year's rig count of 1,408.
Miscellaneous Rig Count:
The miscellaneous rig count (primarily drilling for geothermal
energy) at 4 remained unchanged from the previous week.
Rig Count by Type:
The number of vertical drilling rigs rose by 2 to 406, while the
horizontal/directional rig count (encompassing new drilling
technology that has the ability to drill and extract gas from dense
rock formations, also known as shale formations) was up by 4 to
1,455. In particular, horizontal rig units increased by 5 from the
last week's level to reach an all-time high of 1,248.
Gulf of Mexico (GoM):
The GoM rig count was down by 2 to 56. Both oil and gas rigs
decreased by a unit each from their week-ago levels to 42 and 14,
A Key Barometer of Drilling Activity: An increase or decrease in
the Baker Hughes rotary rig count heavily weighs on the demand for
energy services - drilling, completion, production etc. - provided
by companies that include large-cap names like
However, our preferred pick in this group is
Flotek Industries Inc.
). The Houston, TX-based firm - sporting a Zacks Rank #1 (Strong
Buy) - has a solid secular growth story with potential to rise
significantly from the current level.
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BAKER-HUGHES (BHI): Free Stock Analysis Report
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